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Boeing Scrutinizing Suppliers to Boost Production

By APICS Staff | 12 | 1 | January 03, 2012

Boeing Scrutinizing Suppliers to Boost Production

The aircraft giant Boeing subjects its about 1,000 suppliers to extensive reviews of production materials, schedules, finances, and tools, reports the Wall Street Journal. This year, Boeing’s test regimen prompted one supplier, Vaupell Holdings, to make significant changes, such as replacing its shop floor management software. “Boeing has become much more proactive,” says Joe Jahn, Vaupell’s chief executive. A Boeing employee is at a Vaupell factory nearly every day. Formerly, it was once a week, Jahn says.

Boeing’s skill at stress-testing is critical as the company faces a large number of backlogged orders. Boeing seeks to boost output by about 60 percent in the next three years. Currently, about 3,500 commercial jets are contracted and are valued at more than $270 billion.

In the past 18 months, Boeing has increased its staff of examiners and the number of visits to suppliers. Each evaluation can take days to complete. The intensified scrutiny is a large component of the manufacturer’s efforts to speed up production of nearly all of its commercial jets without encountering bottlenecks and delays. Boeing executives also hope supplier scrutiny will help the company perform against competitors such as Airbus, which recently capitalized on Boeing production delays with the 787 Dreamliner.

California Law Targets Supplier Labor Conditions

Beginning in 2012, a California law requires major companies performing business in the state to disclose the steps they take to ensure their suppliers and partners do not use forced labor, reports Reuters. Companies can be sued by the state attorney general if they disregard the law, but some experts say the court of public opinion will have a greater effect on cooperation, as consumers who care about ethical working conditions will take an interest in how their favorite brands create products.

According to the US Department of Labor, children and forced laborers produce 130 kinds of goods in 71 countries. And according to the International Labor Organization, more than 12 million people are victims of forced labor. Apple is among the corporations that already have come under fire for its labor practices. Suicides that took place at Apple supplier Foxconn raised questions about working conditions in southern China, where many iPhones are made.

The California law applies to retailers and manufacturers with more than $100 million in global sales, which includes some 3,200 companies. Many of these businesses are starting to take a closer look at their practices to improve them. The law ensures that companies will take the opportunity to get a better handle on ethical issues in their labor forces, says Jon Sohm, a lawyer at McKenna, Long, & Aldridge. He adds, “Anything that can harm your brand should be taken seriously.”

Steven Gold's Supply Chain Predictions for 2012

Steven Gold is managing director at global professional services firm Alvarez and Marsal and formerly chief supply chain officer at PepsiCo. In an interview on Spend Matters, he made some predictions for 2012 based on his extensive experience in supply chain management at large, multinational companies. Following are some of his insights.

Gold predicts that 2012 will be inflationary. There is a high probability that input costs, from potatoes to cotton to oil, will rise. Therefore, large-scale companies will need to ask themselves how they can cut costs in a market where consumers expect finished goods prices to remain flat at best. Companies should aim to reduce both their rate of inputs and their consumption, which may require extensive supplier collaboration.

According to Gold, on the procurement front, most organizations are unprepared when it comes to hedging or demand aggregation. But some companies are taking new approaches in 2012. For example, two large North American food and consumer packaged goods companies are comingling, aggregating costs for truckload procurement. Together, these companies represent sufficiently large spend, overlapping transportation routes, and volume to create an impact on carrier pricing. In another example of comingling, two industrial manufacturers are aggregating purchases of finished metals including wires, cables, bearings, and chains to reduce costs.

The fundamental challenge for many industrial companies in 2012 is lack of visibility into historic spending and future demand. Gold argues that new leadership skills are necessary within supply chain groups to overcome this challenge. There may not yet be enough depth of talent in supply chain and procurement to meet the demand for leadership, which means companies may aggressively pursue talent.

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